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Deepening cost analysis for
Onshore Wind Technology
Alessia Elia, Michael Taylor, Fionn Rogan, Brian Ó Gallachóir
ETSAP Wo...
Scope
To develop a more relevant method to investigate costs of energy technologies
• What is missing, and which needs imp...
HIGH LEVEL DRIVERS → MACRO-SYSTEM DYNAMICS
LEARNING DUE TO
DEPLOYMENT
RESEARCH
ACHIVEMENTS
KNOWLEDGE
SPILLOVERS
BETWEEN AC...
Methods to investigate cost reductions
COST-BREAKDOWN
STRUCTURE
BOTTOM-UP COST MODEL LEARNING CURVES
System boundaries
lev...
BOTTOM-UP
COST MODEL
REGRESSION
ANALYSIS –
LEARNING
CURVE
ISSUES
1. LIMITS TO ADDRESS REALITY -DRIVER/FACTOR
(before costs...
Technology costs
Balance of the
system
(BoS costs)
O&M Plant
Technology components
(e.g. blades, transformers,
PV module)
...
Turbine technology price
Wind
turbine price
MATERIALS ENERGY LABOUR
CAPITAL
DEPRECIATION
OVERHEAD
f (industry scale-up,
le...
Technology price – Input costs drivers (Vestas)
0
200
400
600
800
1000
1200
1400
1600
2005 2017
[$2016/KW]
ASP Turbine (Ve...
Input drivers changes 2005-2017
[$2016/kW] Reduction %
Contributions of
input costs drivers 129 23%
Other costs
(overhead)...
Material costs variation (Vestas)
2005 2017
[$2016/kW] v80 -2MW v100-2 MW v110-2
MW
v126-3.45
MW
STEEL 94 79 96 106
CAST I...
Overhead (still unexplained)
COMPANY PROFIT
TRANSPORTATION
/ INSTALLATION
COSTS
SUPPLIER -
COMPETITORS
COSTS
FINANCIAL and...
1FLC – market deployment
15% - US
58% - Denmark
Global market deployment : 21%
0
10
20
30
40
50
60
70
80
90
100
0
200
400
...
Conclusion and Follow-up
• Most of technology costs components are still not explained
• Focus on understanding cost reduc...
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Deepening cost analysis for Onshore Wind Technology

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Deepening cost analysis for Onshore Wind Technology

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Deepening cost analysis for Onshore Wind Technology

  1. 1. Deepening cost analysis for Onshore Wind Technology Alessia Elia, Michael Taylor, Fionn Rogan, Brian Ó Gallachóir ETSAP Workshop, Stuttgart, GERMANY | Nov 9th 2018
  2. 2. Scope To develop a more relevant method to investigate costs of energy technologies • What is missing, and which needs improvements? • To what extent can each costs component be analysed? • The lesson learned can be applied for different energy technologies?
  3. 3. HIGH LEVEL DRIVERS → MACRO-SYSTEM DYNAMICS LEARNING DUE TO DEPLOYMENT RESEARCH ACHIVEMENTS KNOWLEDGE SPILLOVERS BETWEEN ACTORS LOCAL INDUSTRY DEVELOPMENT LOW LEVEL DRIVERS → OBSERVABLE TECHNICAL PARAMETERS ECONOMIES OF SCALE (SIZE – DEVICE) POLICY SUPPORT TECHNICAL QUALITY (PERFORMANCE, MATERIAL USE) INPUTS COSTS SITE CHARACTERISTICS (DISTANCE) INSTALLATION EFFICIENCY (TIME) ECONOMIES OF SCALE (SIZE – PLANT, INDUSTRY) Costs drivers investigated in current methods
  4. 4. Methods to investigate cost reductions COST-BREAKDOWN STRUCTURE BOTTOM-UP COST MODEL LEARNING CURVES System boundaries level of analysis PROJECT LEVEL INDUSTRY/NATIONAL LEVEL INDUSTRY/NATIONAL/GLOBAL LEVEL Data gathering and Drivers of costs reduction ENGINEERING ASSESSMENT (TECHNICAL AND SPECIFICS) OBSERVABLE TECHNICAL PARAMETERS/LOW LEVEL DRIVERS DATABASE ANALYSIS (TECHNICAL BUT GENERAL) OBSERVABLE TECHNICAL PARAMETERS/LOW LEVEL DRIVERS DATABASE ANALYSIS (TECHNICAL BUT GENERAL, MACRO-SECTOR TRENDS) MACRO ECONOMICS DRIVERS/ HIGH LEVEL DRIVERS Extent range (Scope) CASE SPECIFIC (limited) GENERAL CASE GENERAL CASE Reduction costs approach by drivers SENSITIVITY ANALYSIS (STATIC) 1. SENSITIVITY ANALYSIS (STATIC) 2. TIME VARIATION OF TECHNO-ECONOMIC DRIVERS (DYNAMIC) REGRESSION ANALYSIS IN TIME (ECONOMETRIC MODEL-DYNAMIC)
  5. 5. BOTTOM-UP COST MODEL REGRESSION ANALYSIS – LEARNING CURVE ISSUES 1. LIMITS TO ADDRESS REALITY -DRIVER/FACTOR (before costs analysis) Macro Economics/High level drivers Learning factors parameters (low level-high level) Costs reduction analysis ISSUES 1. LOW LEVEL FACTORS ARE NOT ALL DIRECTLY LINKED TO ALL MACRO SYSTEM LEARNING DRIVERS (later costs analysis) Low level factors observed Costs reduction analysis Macro system learning drivers associated Methods characteristics
  6. 6. Technology costs Balance of the system (BoS costs) O&M Plant Technology components (e.g. blades, transformers, PV module) Main costs components of technology costs: Capital costs Input material Labor costs Energy costs Overhead Hard/Soft deployment costs: Planning and project design costs Transport costs Installation/assembly Grid connection costs Main costs components of technology costs: Equipment costs Labor costs Financial costs Customers acquisition/administration Technical feasibility Overhead Land site lease cost Legal-administrative costs (tax, rates, insurances) Operation Maintenance, replacement Investment costs – CAPEX plant OPEX plant Fuel costs Cost of capital FUEL costs FINANCIAL Primary energy resource Transportation costs Transformation costs Discount rate (financial risk) Performance drivers PERFORMANCE Capacity Factor (Resource quality) Technology life Technology choice Degradation Energy generation costs (LCOE) LCOE cost components
  7. 7. Turbine technology price Wind turbine price MATERIALS ENERGY LABOUR CAPITAL DEPRECIATION OVERHEAD f (industry scale-up, learning by-doing) f (industry scale-up, learning by-doing, industry formation & cluster, market) f (usage, market price) f (components length, weight, device scale)
  8. 8. Technology price – Input costs drivers (Vestas) 0 200 400 600 800 1000 1200 1400 1600 2005 2017 [$2016/KW] ASP Turbine (Vestas-DK) [$2016/kW] Capital Depreciation and amortization costs Energy costs (Price and quantity) Materials (price and quantity) Labour (transport +administration +O&M) Labour costs (manufacturing +installation) 878 1446 Difference 2005-2017 568 $/kW 35% 42% 501 372
  9. 9. Input drivers changes 2005-2017 [$2016/kW] Reduction % Contributions of input costs drivers 129 23% Other costs (overhead) 439 77% 129 79 -18 60 5 3 -50 0 50 100 150 TOTAL Materials Labour (production + installation) Labour (transport + administration + O&M) Capital Depreciation and amortization costs Energy costs [$2016/kW] Total cost reduction  568 $/kW
  10. 10. Material costs variation (Vestas) 2005 2017 [$2016/kW] v80 -2MW v100-2 MW v110-2 MW v126-3.45 MW STEEL 94 79 96 106 CAST IRON 14 9 9 15 ALUMINUM 34 14 13 8 COPPER 16 9 9 7 POLYMER TURBINE 3 3 4 3 POLYMER (CABLES) 11 4 4 2 CONCRETE 78 57 65 56 CERAMIC/GLASS +CARBON 29 33 23 22 TOTAL COSTS OF MATERIALS 280 208 223 220 CONTRIBUTION ON MATERIAL EFFICIENCY 72 57 59 1st case: NO CHANGE IN COMMODITY PRICES DIFFERENCES 2005-2017 [$2016/kW] (V90 – 2MW) STEEL 14.96 CAST IRON -8.47 ALUMINUM 6.06 COPPER -5.44 POLYMER TURBINE -0.27 POLYMER (CABLES) -0.94 CONCRETE 7.35 CERAMIC/GLASS + CARBON 1.40 TOTAL COSTS OF MATERIALS 15 2nd case: NO CHANGES IN TURBINE TECHNOLOGY 17-21% MARKET CHANGES 79-83% TECHNICAL IMPROVEMENTS
  11. 11. Overhead (still unexplained) COMPANY PROFIT TRANSPORTATION / INSTALLATION COSTS SUPPLIER - COMPETITORS COSTS FINANCIAL and OTHERS 439 $2016/kW → ~77% Wind Turbine Technology price How can we cover the gap for overhead costs? Average of main manufactures in the world Market, policy, manufacture learning, industry scale-up Local behavior - Industry formation and market dynamics Local behavior – Country specific analysis
  12. 12. 1FLC – market deployment 15% - US 58% - Denmark Global market deployment : 21% 0 10 20 30 40 50 60 70 80 90 100 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Capacitydeployment[GW] Prices[$2016/kW] US - DK comparison Overhead (DK) Overhead (US) ASP Turbine (Vestas-DK) [$2016/kW] ASP Turbine US [$2016/kW] US market deployment [GW] DK - Market deployment [GW]
  13. 13. Conclusion and Follow-up • Most of technology costs components are still not explained • Focus on understanding cost reduction dynamics of overhead costs is needed Are they dependent on local or global conditions? Project level data could provide more insights? More specific data needs: Low drivers or global drivers? Which is the best approach? • FUTURE ANALYSES 1) Balance of the system of wind farm at project level analysis 2) Consideration stage where still deployment is not achieved

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